I’ve got a bunch of new faces in my RSS reader thanks to great lists from Ben Miller and Linda Perlstein. One of the new ones is Walt Gardner, who writes
This attitude calls into question whether proprietary schools are more interested in making a profit or providing education and training.This type of statement perfectly illustrates the difference between those who can’t stand for-profits, and those that think for-profits are very useful (I have no idea which camp Walt is in as this was the first post of his that I have read).
The primary purpose of any for profit institution, whether a school or a bakery, is to make profit. In a well functioning market for education, the only way to obtain sustainable profits would be to create value (a good education for the price), just as the only way to make a sustainable profit in the bakery business is to create value (a good baked good for the price).
But we don’t have a normally functioning market for higher ed. We have a system where the quality of education provided is unknown and outcomes (such as job placement rates and average salaries) are deliberately hidden. This means that profits and value creation do not necessarily go together.
Those who can’t stand for-profits see profits and say “How terrible. Money that could have been used to teach students is lining the pockets of corporate shareholders instead.” Those who hold out hope for for-profits see this and say “That’s unusual. There must be something dysfunctional about the functioning of higher ed.” They then look for peculiar aspects of the industry to explain the anomaly. They aren’t hard to find (see number 25 or our recent project for a brief introduction to them).
Given the loose connection between quality and profit, there are probably lots of examples of undeserved profits out there. But obsessing over their existences is akin to worrying about the symptom rather than the disease. The same system that allows for undeserved profits for for-profit schools also allows for them in public and private-non-profit schools. While they don’t distribute their “profits” to shareholders, as Richard Arum and Josipa Roksa have shown, they aren’t using them to provide an education either.
Instead of trying to banish the symptom (what we think are undeserved profits), we should treat the disease that allows them to exist. If we create a system where the connection between profit and value creation is strong, then the only way for-profits can make a profit will be to provide a good education. Importantly, such a strong connection would also fix the dysfunctional incentives of public and private-non-profit schools.
We can either fix the incentives of the system, which would lead to better for-profit, public and private-non-profit institutions alike, or we can continue in our quest to eradicate the for-profits, letting the dysfunction in public and private-non-profits fester. Doesn’t seem like a hard choice to me.